- EUR/USD treads water around weekly top, pauses three-day recovery.
- DXY, yields can’t cheer Fed’s rate-hike, hawkish dot-plot as Chairman Powell expects inflation to ease post 2022.
- Softer US Retail Sales, mixed clues on Ukraine’s peace talks and upbeat news from China trouble pair traders.
- ECB President Lagarde, second-tier US data may entertain traders but risk catalysts are more important for clearer directions.
EUR/USD remains as a dull affair around 1.1030-35, after refreshing the weekly top to 1.1052 during the early Asian session on Thursday.
The major currency pair portrays the sluggish markets amid mixed concerns over the Moscow-Kyiv talks. In doing so, the quote ignores upbeat headlines from China, suggesting fewer covid-linked challenges to the world’s second-largest economy. Also challenging the pair’s moves could be the market’s anxiety ahead of a speech from the European Central Bank (ECB) President Christine Lagarde, up for speaking at the Institute for Monetary and Financial Stability (IMFS) in Frankfurt.
On Wednesday, the US Federal Reserve (Fed) matched wide market expectations of a 0.25% rate-hike and also offered six consecutive lifts during the year. However, Chairman Jerome Powell poured cold water on the face of the USD hawks by expecting softer inflation going forward.
Read: Federal Reserve hikes 0.25%, cautious on balance sheet and economic growth
Additionally, the US Retail Sales figures for February eased below the forecasts and prior whereas the Control Group figures also turned negative, which in turn challenged the US dollar bulls before the latest consolidation of the US Dollar Index (DXY) around 98.40.
Elsewhere, Kyiv’s rejection of proposed neutrality in the 15-point peace plan and the International Court of Justice’s order to Russia to suspend the invasion of Ukraine challenge sentiment but the continuation of talks and recently easy tone of Moscow keeps markets hopeful.
Also acting as the key risk catalyst is China’s second day of easy covid numbers after refreshing the record numbers during the weekend. “China reports 1,317 confirmed COVID cases on March 16 versus 1,952 a day earlier,” per Reuters. Recently, China’s local government official said, “Henzhen, China's covid-hit city, will allow businesses to resume work and manufacturing in a timely way.” Furthermore, China Vice Premier Liu He’s push for the measures to boost the economy in the first quarter (Q1) also keeps the risk-appetite firmer.
Against this backdrop, the US stock futures print mild losses whereas the Asia-Pacific equities track Wall Street gains. Further, the US 10-year Treasury yields decline 5.4 basis points (bps) to 2.13% while reversing from the highest levels since May 2019.
Looking forward, the second-tier US data relating to housing, jobs and manufacturing may entertain EUR/USD traders but major attention will be given to Ukraine headlines and ECB’s Lagarde. Should the ECB Boss refrain from further tightening the latest weakness may extend.
Technical analysis
A clear upside break of the 10-DMA, around 1.0965 by the press time, directs EUR/USD towards January’s low of 1.1121.
As the MACD teases a bull cross and the RSI remains steady on the daily chart, the latest rebound is likely to extend.
